Leading Indicators Down in July

September 21, 2000 --The University of San
Diego's Index of Leading Economic Indicators for San Diego County
fell 0.3 percent in July. The drop was fueled by a sharp loss in
consumer confidence and smaller declines in building permits,
initial claims for unemployment insurance, local stock prices,
and the outlook for the national economy. The only positive
component was help wanted advertising, which was up slightly
during the month.

Index of Leading Economic
IndicatorsThe index for San Diego County that
includes the components listed below (July)Source: University of San Diego

- 0.3 %

Building PermitsResidential units authorized by building
permits in San Diego County (July)Source: Construction Industry Research
Board

- 0.19%

Unemployment InsuranceInitial claims for unemployment insurance
in San Diego County, inverted (July)Source: Employment Development Department

Consumer ConfidenceAn index of consumer confidence in San
Diego County (July)Source: San Diego Union-Tribune

- 1.25%

Help Wanted AdvertisingAn index of help wanted advertising in the
San Diego Union-Tribune (July)Source: Greater San Diego Chamber of
Commerce

+ 0.12%

National EconomyIndex of Leading Economic Indicators
(July)Source: The Conference Board

- 0.16%

July's decrease was the first decline in the
USD Index of Leading Economic Indicators since December 1998. The
breadth of the decline was broad, with five of the six components
down during the month. But it was not deep, as only one of the
components (consumer confidence) was down significantly. Since
economists usually look for three consecutive changes in a
leading index before forecasting a change in an economy's
direction, the drop in July does not signal that a downturn in
San Diego's economy is either imminent or inevitable. But it
could be an indication that we will see a slowing in the local
economy's rapid growth sometime in the first half of 2001.

The biggest news in terms of the individual
components is the continuing drop in consumer confidence. July's
decline was the fifth consecutive monthly decrease in that
component. A host of bad news locally, including soaring
electricity and gas prices, high housing costs, and a downturn in
some local stocks, e.g., a two-thirds drop in the price of
Qualcomm shares from their high, have battered the psyches of
local consumers. This is significant because consumption is such
a large part of any economy, including the local one.

Another interesting development is that the
national Index of Leading Economic Indicators has now decreased
for three months in a row. None of the declines has been very
large, but it may be a sign of a weaker national economy at the
beginning of 2001. This is in line with the "election
business cycle," where the economy continues to advance and
will not turn downward until after an election. Look for a cut in
interest rates by the Federal Reserve sometime in 2001 to counter
a slowdown in the national economy.

July's decrease puts the Index of Leading
Economic Indicators for San Diego County at 150.3, down from
June's reading of 150.8. The fluctuations of the Index of Leading
Economic Indicators for San Diego County for the last year are
given below: